BOE Keeps Interest Rates at 3.75%, Warns of Rising Inflation
The Bank of England has kept interest rates at 3.75%, despite growing pressure to raise them due to the ongoing conflict in Iran and its impact on global energy prices.
In a split vote, six members of the Monetary Policy Committee (MPC) voted to hold rates steady, while three called for an increase to 4%.
Bank Governor Andrew Bailey said that so far, higher global energy costs have had a limited effect on price and wage setting in the UK, but warned that this volatility will eventually have a bigger impact on inflation.
The MPC now expects Consumer Prices Index (CPI) inflation to rise to about 3.75% by the end of 2026 and peak at about 4% by the start of 2027, up from its previous forecast of 3.2% by the end of the year.
The Bank also announced the next stage of its quantitative tightening (QT) programme to sell off government bond purchases, known as gilts, with a reduction in annual sales from £87.5 billion to £20 billion.